ANALYSIS: H1 2023 M&A Activity Was as Bad as It Seemed

There’s been a lot of talk about this year’s horrible start to dealmaking, but just how lousy was H1 2023 for mergers and acquisitions? My analysis of the data confirms that it was a rough half year.

The first half of 2023’s global M&A deal volume—covering a wide variety of transaction types, including minority stake transactions and venture capital financing rounds—continued last year’s slide after 2021’s record-breaking deal activity. The $1.3 trillion in M&A deal volume for H1 was the second-lowest in the last 10 years; only H1 2013 and H1 2020 were lower.

Viewing quarterly M&A data likely won’t raise spirits, either. This year’s first two quarters hold the second- and third-lowest quarterly deal volumes since 2017; only Q2 2020—when we were in the throes of the Covid-19 pandemic—was worse.

Q2’s global M&A deal volume ($6.7 billion) was lower than all other Q2s since 2017 (except for Q2 2020) by a minimum of roughly $2 billion. Dealmakers may find some hope, however, in the modest increases in deal volumes from Q1 to Q2 2023 for both global M&A deals and controlling-stake M&A deals.

What’s to Come

Perhaps 2023’s third quarter will buck the traditional summer slump in dealmaking, but it seems unlikely. And alternative deal structures—a common avenue for deal parties to look to when the deal environment isn’t as favorable or stable—don’t appear to be the answer to the current difficult deal environment.

Spinoffs (deals involving the creation of independent companies through the sale or distribution of new shares of an existing line of business or an existing division of a parent company); buybacks (deals involving repurchases of outstanding shares by companies that reduce the number of shares on the market); and joint ventures (deals involving transactions undertaken jointly or by two or more parties that otherwise retain their distinct identities) all saw Q1-to-Q2 drops in deal counts. The number of spinoff transactions decreased for the third consecutive quarter, and the number of buyback transactions decreased for the second consecutive quarter.

Notably, the number of joint ventures continued the quarterly decline that began after Q4 2021, marking six consecutive quarterly decreases in joint venture deal counts. Even alternative structures for M&A deals (deals involving the acquisitions or sales of control in a company or asset for strategic purposes) have decreased despite the unfavorable dealmaking conditions, including going private transactions (deals where the acquirer is made up of an affiliated party of the target company and a publicly-traded company converts to a private company); related party transactions (deals where the seller holds a majority stake in the acquirer or where the acquirer holds a majority stake in the seller); and minority purchase transactions (deals with initial stake purchases of 50% or less of a target company).

If these alternative deal structures were attractive solutions in the current market, I would have expected the deal counts to have increased from Q1 to Q2 of this year. But because that didn’t happen, dealmakers may need to look to other types of transactions like investments and lending until traditional mergers and acquisitions pick up.

Bloomberg Law subscribers can find related content on our M&A Deal Analytics resource.

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